Giving land and property to charity need not be taxing
Gifts of property or land to charities can burden people with a hefty tax bill if they are not administered properly, Jacqui Lazare, a senior associate lawyer at national law firm Clarke Willmott LLP has warned.
Often charities are not able to accept such gifts as they are difficult to administer, says the Bristol-based specialist in estate planning and philanthropy. But before deciding to sell property, land or shares and give the proceeds to charity, individuals should look at other methods.
Jacqui Lazare says: “A prospective donor should check with the charity first that the gift will be welcomed. Charitable giving can, however, also encompass gifts of land and certain qualifying investments and these gifts can attract more favourable tax treatment.
“In order to gain tax relief the proposed charity gift must be a gift of land or property or of “qualifying investments”. Qualifying investments include shares listed on any recognised stock exchange (including foreign exchanges), shares listed on the Alternative Investment Market and units in authorised unit trusts.
“To attract tax relief the gift must be of the donor’s whole beneficial interest in the land and if it is co-owned, all the owners must make the gift. Tax relief is not available if the donor continues to occupy the property.
“Sales at under value can also receive relief and so it is also possible to ensure your own financial security while giving to charity.”
Jacqui Lazare gave the following example: Sarah has a property which she inherited some years ago from her aunt. The current value is £175,000. Sarah very much wishes to make a substantial donation to a charity which carries out research into a disease which her aunt lived with during her lifetime. For her own financial security, she would also like to pay off her £100,000 mortgage.
“She cannot give the charity a part share in the house and obtain tax relief. However, if Sarah sells the property to the charity at an undervalue of £100,000, she receives sufficient proceeds of sale to redeem the mortgage and makes a gift of £75,000 to the charity on which she receives income tax relief.
“If Sarah had sold the property, she would have paid a hefty capital gains tax bill while the sale to the charity is treated as being on a no gain no loss basis. The value of the gift can be deducted from Sarah’s income tax bill for that tax year.
The value of the gift is the market value of the land plus any costs incurred and less the value of any benefit received by the donor.”
